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Research Papers N° 33
European Post Graduate School of International & Development Studies
Energy Security in the EU Area: The Eastern
Mediterranean Region
Konstantinos Gouras
2013
2
ENERGY SECURITY IN THE EUROPEAN UNION AREA
THE EASTERN MEDITERRANEAN REGION
Contents
1. Introduction
2. Energy Security. Definitions & Principles
2.1. General Principles Of Energy Security
2.1.1. The Principle of Availability
2.1.2. The Principle of Reliability
2.1.3. The Principle of Affordability
2.1.4. The Principle of Environmental Sustainability
2.1.5. The Principle of Diversification of Supply
2.1.6. The Principle of Resilience
3. The Global Energy System. Trends & Prospects For Cooperation
3.1. Prospects for global energy cooperation
3.2. International Energy Agency (IEA)
3.3. International Renewable Energy Agency (IRENA)
3.4. Global Energy Forum International Energy Forum (IEF)
4. The energy policy of the European Union
4.1. Historical Overview
4.2. The European Atomic Community
4.3. 1991 – European Energy Charter Treaty on the European Energy
Map 1994
4.4. 1994 Energy policy in the framework of the Maastricht Treaty
4.5. Facts and Requirements
5. Priorities And Prospects. The institutional framework
5.1. Towards a European strategy for the security of energy supply
COM(2000) 769, November 2000
5.2. European Commission Green Paper on Energy Efficiency-or Doing
More With Less "-com(2005) 265
5.3. European Commission Green Paper A European Strategy for
Sustainable, Competitive and Secure Energy - Com(2006) 105
5.4. The Commission Communication "An energy policy for Europe ',
COM (2007) 1
5.5. The "energy" of the Treaty of Lisbon (2007)
3
5.6. Commission communication ' Energy for 2020. A strategy for a
competitive, sustainable and secure energy COM (2010) 639
5.7. Commission communication ' Priorities for the energy infrastructure
for the 2020 and beyond – draft consolidated European energy network
",COM (2010) 677
5.8. European Council Summit on energy, 2011: "Europeanising Energy
Policy: time to act
5.9. Communication from the Commission progress towards achieving
the objective of energy from renewable sources by 2020 ", COM (2011)
31
5.10. Commission communication on security of energy supply and
international cooperation “The EU Energy Policy. Engaging with Partners
across OUR Borders ' COM (2011) 539
5.11. Commission Communication “Making the internal energy market
work": (2012) COM 663
6. The European Gas Scene
6.1. Historical Development of the Gas Supply in the EU
6.2. The current supply situation in the European Union
7. The Role of the Eastern Mediterranean related to Energy Security in Europe
7.1. Geopolitical, economic and environmental issues
7.2. Turkey as a possible transit
7.3. Route via Greece
7.4. Environmental Aspects
8. Epilogue – Conclusions
Abbreviations
Bibliography
Internet pages
List of Charts
4
1. Introduction
The process of European Integration through the common market for steel, coal
and nuclear energy as well as the process of a common European Energy
approach makes the European Union one of the most interesting regions on the
planet concerning the subject of energy security. Taking into consideration the
expected price increases of fuels and electricity, as well as the problems related
to climate protection that concern many industrialized nations the issue of
energy security in the European Union becomes even more vital. A global
shortage of oil could represent a systemic risk, because of it’s wide usage as a
energy source and as a raw material for the industry. Nearly every social
subsystem would be affected by rising costs.
The “World Energy Outlook”, which is updated every year by the International
Energy Agency (IEA) poses several key trends towards worrying directions, e.g.
the increase of global energy demand by one-third from 2010 to 2035 with China
and India accounting for 50% of the growth1. European Unions oil imports will
overtake those of the US around 2015, and the largest natural gas suppliers in
2035 will be Russia (mostly conventional), followed by United States (more
unconventional production)2. International coal markets & prices will become
increasingly sensitive to developments in Asia; the value of subsidies to fossil
fuels will rise from $66 billion in 2010 (compared with $409 billion for fossil
fuels), to $250 billion in 2035. An increasing share of Russian oil and gas exports
will shift from the European Union to Asia3. On the environmental side and
despite steps in the right direction, the 20-20-20 goals will be missed4.
As a critical resource, energy must be readily available to support all critical
activities of our society. This thesis will try to define the term energy security
and will try to analyze the facts and trends of the global energy system. It will
explain the structure of energy security of the European Union. By doing so it will
1 See http://www.worldenergyoutlook.org/publications/weo-2011/
2 See America’s New Energy Future: The Unconventional Oil and Gas Revolution and the US
Economy in IHS Report, October 2012, http://marcelluscoalition.org/wp-
content/uploads/2012/10/IHS_Americas-New-Energy-Future.pdf
3 See Calder Kent E., “Fueling the Rising Sun: Asia's energy needs and global security”,
http://findarticles.com/p/articles/mi_hb137/is_3_19/ai_n28699030/pg_2/?tag=content;col1 4 See Energy governance in the European Union:. Thijs Van de Graaf, December 2021,
http://www.isis.org.my/files/2012/Nexus/Thijs_Van_de_Graaf.pdf
5
concentrate on the importance of the Eastern Mediterranean Area for the
European Union.
The thesis is structured in five parts:
The first part will deal with the definition of the term energy security and will
explain the basics principles. The second part will cover the facts and trends of
the global energy system as well as perspectives of the global energy
cooperation. The third part will be dedicated to the energy policy of the
European Union. A short historical overview will be followed by the presentation
of current data and needs. Afterwards through the analysis of the institutional
framework an evaluation of the major goals and priorities of the European Union
in terms of energy security will be shown. The fourth part of the thesis will look
at the European Gas Scene, its historical development and the current situation.
The fifth part will focus on new potential energy sources of supply for Europe
and in particular in the Eastern Mediterranean area.
2. Energy Security. Definitions & Principles
Energy security is, first and foremost, a matter of public policy with an impact on
economic development and is defined as the means used in order to ensure and
maintain the necessary energy recourses for the smooth functioning of the
industry but also other activities like electricity, heating, etc. The concept of
energy security however is not static, but dynamic and very complex because it
involves economic, legal, technical and public policy parameters5. The concept of
energy security is of course subject to some basic principles but, because of
technological progress, due to scarcity of energy resources, due to new
international treaties, due to the nuclear accident in Fukushima, Japan and the
war in Libya in 2011, the embargo Iran's oil exports, the Syria crisis and the
global economic crisis, it is always redefined.
Energy security could be defined as the availability of energy products in
sufficient quantity and reasonable prices with respect to the environment that
are distributed through a secure supply6 chain.
5 Bert Kruyt, D.P.vanVuuren, H.J.M.deVries, H.Groenenberg, “Indicators for energy
security”, Energy Policy , no 37, pp. 2166-2181 “ There is no one ideal indicator, as the
notion of energy security is highly context dependent 6 See similar definition of IEA http://www.iea.org/stats/defs/
6
2.1. General Principles Of Energy Security
The concept of energy security becomes clearer through the analysis of the basic
principles that govern it. It has to be pointed out, that the principles of energy
security evolve dynamically and their content is always adjusted based on
developments and conditions prevailing in the technological sector, at
international markets and transnational relations7.
2.1.1. The Principle of Availability
It consists in providing sufficient amount of energy products to cover consumer
needs. The availability requires the existence and well-functioning of energy
markets and energy transport networks. Well-functioning energy markets require
agreements based on mutual interests of service providers and energy
consumers as well as legal and regulatory frameworks that are socio-political
accepted. Flexible energy markets can absorb an energy demand shock allowing
quick reaction on the production side8.
2.1.2. The Principle of Reliability
The principle of reliability measures the degree of protection from a potential
energy breakdown and has clear geopolitical implications. Reliability is achieved
through diversification of supply chain sources, diversification of the energy mix,
creation of emergency stocks, need to upgrade and build new energy
infrastructure, as well as the timely dissemination of information on energy
markets, particularly in matters of pricing. Aging, neglect, disruptions to physical
infrastructure, or mismanagement have adverse impacts on energy reliability.
Anticipating future levels of reliability is difficult, especially when new
infrastructure and technologies are expected to be brought on line9.
2.1.3. The Principle of Affordability
The principle of affordability defines the affordable amount of energy that can be
used. The term is directly related to pricing and volatility of energy products
prices. The lack of affordable energy can create the phenomenon of "energy
7 Carlos Pascual & Jonathan Elkind, Energy security: economics, politics, strategies, and
implications, Brookings Institution Press, 2010, pp. 2 “The notion of energy security
hinges on perspective”. 8 Daniel Yergin, “The Fundamentals of Energy Security”, CERA Special Report, April 2007,
pp.10 “…markets themselves need to be recognized as a source of security (…)Today, large,
flexible, and wellfunctioning energy markets provide security by absorbing shocks and
allowing supply and demand to respond more quickly..”. 9 See Center for Strategic and International Studies, Defining Energy Security Factors
http://csis.org/files/media/csis/pubs/090130_Annex_II_Defining_Energy_Security_Fac.pdf
7
poverty". The price of oil and its fluctuation play an important role in the
principle of affordability. Oil is the main energy resource and the pricing of other
energy products is often calculated on the basis of oil prices.
2.1.4. The Principle of Environmental Sustainability
The principle of environmental sustainability is a relatively modern principle of
energy security and is related to the environmental consequences because of the
exploitation, use and transfer of energy sources. Strengthening of energy
security should be consistent with the promotion of environmental sustainability
in order to promote, respectively, sources and forms with the least possible
environmental costs and limiting the phenomenon of climate change10.
2.1.5. Diversification of Supply
Multiplying one’s supply sources reduces the impact of a disruption in supply
from one source by providing alternatives, serving the interests of both
consumers and producers, for whom stable markets are a prime concern.
Especially this thesis will deal with the diversification of supply by proposing a
new supply route for Europe.
2.1.6. The Principle of Resilience
A so called “security margin” in the energy supply system that provides a buffer
against shocks and facilitates recovery after disruptions. Resilience can come
from many factors, including sufficient spare production capacity, strategic
reserves, backup supplies of equipment, adequate storage capacity along the
supply chain, and the stockpiling of critical parts for electric power production
and distribution, as well as carefully conceived plans for responding to
disruptions that may affect large regions.
3. The Global Energy System. Trends & Prospects For Cooperation
The global energy system is structured on the basis of the interaction between
marketable energy products and consumer trends.
According to estimates by the IEA to the year 203511
-The global GDP will grow. The GDP growth is a fundamental factor that
correlates with the increase of energy demand.
10
See World Bank, Energy Security, environmental Sustainability, and climate change, March
2011, http://siteresources.worldbank.org/INTEAPHALFYEARLYUPDATE/Resources/550192-
1300567391916/EAP_Update_March2011_part2_VIII.pdf
11 These estimates are based on the so-called New Policies Scenario of the IEA which
analyses and provides energy trends for the period 2009-2035
8
- The world population in non-OECD countries12 is expected to increase.
More specifically there in expected to experience a population increase of
Brazil, Russia, India and China. Of course this results to a similar increase
of energy demand in these geographic areas.
-The will be an upward trend in the prices of energy products, mainly oil.
With the help of the following charts13 the global energy trends can be
illustrated
Chart 1: Share of energy products in global energy demand
Source: World Energy Outlook 2012, IEA
Chart 2: Energy "mix" in selected countries and regions
Source: World Energy Outlook 2012, IEA
12
Organisation for Economic Co-operation and Development
http://www.oecd.org/home/0,2987,en_2649_201185_1_1_1_1_1,00.html 13
World Energy Outlook 2012
9
Chart 3: Global energy demand by region
Source: World Energy Outlook 2012, IEA
The above graphs lead to the following conclusions:
• There is a reconfiguration of the global energy mix scale with a declining
trend in oil consumption and a gradually increase in the consumption of
natural gas. The increase in consumption of natural gas will contribute
positively in reducing oil and coal consumption. It must be noted,
however, that natural gas does not have, unlike the oil, a unified global
market. Price fluctuations for the natural gas are dependent on
geographical and local economic conditions.
• The demand for energy in developing countries, in particular of Brazil,
Russia, India and China, will grow.
• There is a slight but steady rise in consumption of renewable energy
sources.
In all the above the current geopolitical challenges in the energy sector need to
be added deriving from:
• The war of Libya and the activation of the mechanism strategic stocks of
the IEA.
• The embargo against exports of Iran14.
14
For further details see:“Iran Sanctions: Right Intent, Wrong Approach”, European
Energy Review, 16 February 2012,:
http://www.europeanenergyreview.eu/site/pagina.php?id=3537&toegang=cfcd208495d565ef66e7dff
9f and Laura el-Katiri , Bassam Fattouh , “On Oil Embargos and the Myth of the Iranian
10
• The nuclear accident at the Fukushima nuclear power and the future of
nuclear energy. Germany, decided after the accident to shut down all
operation all nuclear power plants in the country within a decade15.
• Developments in extraction and transport infrastructure of natural gas,
including developments in the so-called natural gas Southern Corridor16.
• Developments in the unconventional gas17 resources. The International
Energy Agency (IEA) has projected that under the right circumstances
unconventional gas may meet more than 40% of the increased global
demand for gas by the year 2035.
• The war in Syria18.
• The Northern Africa conflicts.
3.1. Prospects for global energy cooperation
International cooperation in the energy markets has been reinforced in recent
decades, but energy markets continue to be unstable, especially on pricing
related issues. The international organizations that play a leading role in
international energy relations are: the International Energy Agency –IEA-, the
International Agency for renewable Energy and the Global Energy Forum –
IRENA-, the International Energy Forum-IEF-. A brief presentation of those
organisations will follow below as well as the cooperation efforts among them.
3.2. International Energy Agency (IEA)
The IEA was established after the first oil crisis response in 1973 as an answer to
OPEC, on the initiative of the United States. The main objectives of the Agency
Oil Weapon”, Oxford Energy Comment, The Oxford Institute for Energy Studies, February
2012,: http://www.oxfordenergy.org/wpcms/wp-content/uploads/2012/02/On-Oil-Embargos-and-
the-Myth-of-the-Iranian-Oil-Weapon1.pdf 15
See Siemens AG One year after Fukushima – Germany’s path to a new energy policy, March
2012, http://www.siemens.com/press/pool/de/feature/2012/corporate/2012-03-
energiewende/factsheet-e.pdf 16
See Chapter below 17
Maximilian Kuhn, Frank Umbach, “Strategic Perspectives of Unconventional Gas: A Game
Changer with Implications for the EU`s Energy Security”,EUCERS Strategy Paper, Vol.01,
No. 01, May 2011. EUCERS, London:
http://www.eucers.eu/wpcontent/uploads/EUCERS_Strategy_Paper_1_Strategic_Perspectives_of_U
nconventional_Gas.pdf 18
See Asseburg Muriel and Wimmen Heiko, Civil War in Syria, SWP Comments, December 2012,
http://www.swp-berlin.org/fileadmin/contents/products/comments/2012C43_ass_wmm.pdf
11
are monitoring the functioning of oil markets and the creation of strategic stocks
of oil19. These have been released three times so far:
• in 1991, with the Gulf War;
• in 2005 after Hurricane Katrina and
• in 2011 during the war in Libya.
On top of this it is a significant body of research about energy and although it
started as a link between member states and oil consumers it has become the
most important think tank on energy issues, thus maintaining an important tool
to influence energy markets and related policies.
The major difficulties the IEA is facing is the participation of OSCE Member
States, -just 28 members. Also, the change in the energy market share due to
increased energy demand of developing countries 20, will in the future cancel the
Agency’s existence i.e., ensuring oil supply in times of shortage and the
stabilization of oil markets in periods crisis. Finally, the gradual reduction in oil
consumption and increasing market share of renewable energy will be another
challenge for the Agency.
3.3. International Renewable Energy Agency (IRENA)21
IRENA was founded in 200922 in order to promote renewable energy worldwide
and already lists 89 members. The initiative for the establishment came from
Germany, Denmark and Spain. It is the first international organization that the
U.S. became a member in the last fifteen years and also one of the few
international organizations that is located in the Middle East region, namely the
United Arab Emirates23. In January 2012 the IEA and IRENA signed a
memorandum of understanding mainly in the fields of research and exchange of
information. It has to be noted that initially the IEA reacted to the establishment
of IRENA. An independent Agency for Renewable Energy can enhance the
19
See also Decision on Establishing the International Energy Agency, 15th November 1974, http://www.iea.org/media/aboutus/history/decesionofthecouncil.pdf
20 See interview of the Director of IEA Maria van der Hoeven, by Karen Beckman , We must
find mechanisms to strengthen cooperation with emerging economies”, European Energy
Review, 15 March 2012,: http://www.europeanenergyreview.eu/site/pagina.php?id=3581&zoek=IEA 21
http://www.irena.org/home/index.aspx?PriMenuID=12&mnu=Pri 22
Thijs Van de Graaf “How IRENA is reshaping the global energy architecture”, European
Energy Review, March 2012: http://www.europeanenergyreview.eu/site/pagina.php?id=3615 23
See Scheer Hermann, The long road to IRENA – A Chronology, EUROSOLAR, http://www.wcre.de/en/images/stories/pdf/irena_chronologie.pdf
12
political will of its member states towards renewable energy sources vis-à-vis
nuclear energy and hydrocarbons.
3.4. Global Energy Forum International Energy Forum-(IEF)24
Within its framework members of the IEA and OPEC25 conduct continuous
dialogue. In 2001, the ministerial meeting of the Organization signed a Charter
of Cooperation26 in order to strengthen the dialogue between producing and
consuming countries and finding mechanisms to reduce the price volatility. In
2003 the IEF Secretariat was founded for further institutionalization of the
dialogue between producing and consuming countries. In conclusion, it has to be
noted, that a successful international cooperation in energy markets should be
based on:
• one standard form of communication between countries on their energy
politics;
• an agreement about how to achieve a more sustainable energy future;
• the creation of mechanisms for managing energy crises.
4. The energy policy of the European Union
4.1. Historical Overview
Energy has been and continues to be an integral part of the process of European
integration. Two of the three founding European Union treaties related to the
management of energy resources. The European Coal and Steel Community
(ECSC)27 had the aim of organising the free movement of coal and steel and the
free access to production resources.
Also, a high authority was supervising the compliance with the rules of
competition and price transparency.
4.2. The European Atomic Community
The European Atomic Energy Community (EAEC or Euratom)28 was initially
established for the coordination of research national programs aiming at the
24
http://www.ief.org/ 25
http://www.opec.org/opec_web/en/ 26
See“IEF Charter marks a new era of international energy governance”, European Energy
Review, February 2011,:http://www.europeanenergyreview.eu/site/pagina.php?id=2769&zoek=IEF 27
See http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_ecsc_en.htm. 28
http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_euratom_el.htm
13
peaceful use of nuclear energy and until today contributes to the sharing of
knowledge, infrastructure and funding of nuclear energy. The third Treaty (EEC),
concerning the economy, also contained provisions related to the energy sector.
The vulnerability and dependency of the European economy from energy
resources becomes even more evident in the 1960s. The European economies
begin to depend on oil and this dependency became evident during the first oil
crisis of 197329. This crisis is a focal point for the European Communities as
leading to "internationalization" of their energy relations, meaning the reliance
from energy products of third countries and their vulnerability to shocks in the
global energy market. The establishment of the European Energy Charter was
the main act towards adapting to these new conditions.
4.3. 1991 – European Energy Charter30 Treaty on the European Energy
Map 1994
It is the first major multilateral Treaty after the end of the Cold War31. The
Treaty establishes a framework for international cooperation between European
and other industrialised countries in order to develop the energy potential of
countries of Central and Eastern Europe and strengthen the energy supply of the
European Union32. Central idea of the Charter and the Treaty is the beginning of
cooperation between Western European countries, which have advanced
technology and know-how, and Eastern European countries, and in particular
those of the USSR, which are rich in energy resources. The Charter is a Code of
Conduct and involves the political will to strengthen democratic institutions in the
region of Eastern Europe through economic and technological support provided
by the West.
4.4. 1994 Energy policy in the framework of the Maastricht Treaty
In the 1990s, the Treaty of the European Union, or more commonly known as
Treaty of Maastricht33 calls on the Member States to cooperate in all sectors
including the energy sector. The second oil crisis of 1979 with the Iranian
29
See Hamilton, D (2003). “What Is an Oil Shock?” Journal of Econometrics, vol. 113
30 http://www.encharter.org/index.php?id=1&L=0 and Willenborg, Robbert, Christophe Tonjes,
and Wilbur Perlot. "Europe's Oil Defences: An Analysis of Europe's Oil Supply
Vulnerability and Its Emergency Oil Stockholding Systems." (2004).
http://www.clingendael.nl/publications/2004/20040100_ciep_paper_willenborg.pdf 31
Regina S. Axelrod, “The European Energy Charter Treaty. Reality or illusion? ”, Energy
Policy, Vol.24, No.6. pp. 497-505, 1996. 32
http://europa.eu/legislation_summaries/energy/external_dimension_enlargement/l27028_el.htm 33
http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_maastricht_el.htm
14
Revolution and the third oil crisis in 1990 with the Gulf war created imbalances in
the supply and demand of oil, which contributed to high fuel price volatility.
Starting in 2000, with the Green Paper of the European Commission on security
of energy supply, European Institutions, Directorates-General for energy and
transport of the European Commission, are becoming increasingly active in
setting objectives and priorities for a coordinated energy policy throughout the
Member States of the Union. It should be noted that the energy policy in the EU
is part of the so-called sectoral policies. The sectoral policies relate to large
sectors of the economies of Member States namely: industry, research, energy,
transport, agriculture and fishing. While the Treaty explicitly dictates the
development of common policies in the last three areas, this does not apply to
other areas. The Member States will retain many powers in the formulation of
these policies moving in with the logic of promoting national interests and not of
the community. The absence of a strong legal basis, namely, a Treaty text is a
powerful argument against the development of common policies of the European
Union Member States in large sectors of the economy34.
4.5. Facts and Requirements
A series of charts below will reflect the data and energy needs of EU Member
States
Chart 4: Production, imports, consumption & energy
Source: Market Observatory of Energy
34
See Wincott, Daniel. (1996). “Federalism and the European Union: The Scope and Limits of the
Treaty of Maastricht”.
15
Chart 5: EU energy consumption by fuel type
Source: Market Observatory for Energy35
Chart 6: Energy "mix" EU Member-States, 2009
Source: Eurostat36
The analysis of the chart above concludes the following findings:
• -Energy demand in the European Union will follow the global trend.
• -High dependency on energy products in third countries, particularly in
hydrocarbon sector, is growing. By today's standards, the EU imports over
60% of natural gas and 80% of the oil it consumes.
• -High dependency on hydrocarbons observed for almost all Member States
of the EU. 35
http://ec.europa.eu/energy/observatory/index_en.htm 36
http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/
16
• -There are significant differences in the energy mix of the various
Member-States. These differences are the main obstacle in a common EU
energy policy after the needs and the priorities are different.
• -High dependency on hydrocarbons makes energy consumption of EU
environmentally harmful.
5. Priorities and Prospects. The institutional framework
The steps towards a unified and coherent energy policy of the European Union
have been accelerated over the last ten years through a series of legislative acts.
Their main feature is adding a separate Chapter on energy in the Treaty of
Lisbon and the European Summit on Energy held in February 2011 called
"Europeanising Energy Policy: time to act"37.
Through these instruments, the European Union is trying to move from a rhetoric
level to action in the field of environmental effects and the creation of an internal
energy market, while issues such as energy diplomacy and security of supply are
also addressed.
In this context, the contribution and actions of the European Commission are
very crucial. As it will be show from the analysis that follows, the European
Commission, through the actions of the Directorate General for Energy, leads on
issuing recommendations on legislation and relevant policies and actions based
on the common European interest.
5.1. Green Paper38 Towards a European strategy for the security of
energy supply COM(2000) 769, November 200039
This Green Paper launched the debate on the need of strengthening the
European Common Energy Policy. It emphasizes the European Union dependence
from hydrocarbons and the environmental degradation of Europe. The document
also stresses the need to harmonise the energy sector of the Member States in
an effort to reform the European energy mix and the European energy
infrastructure. It proposes the establishment of a long-term European Energy
Policy with the following priorities: Balancing energy supply and demand,
37
See http://ec.europa.eu/energy/time_to_act_en.htm 38
A green paper is a tentative government report and consultation document of policy
proposals for debate and discussion without any commitment to action; the first step in
changing the law. See http://europa.eu/documentation/official-docs/green-papers/index_en.htm 39
See http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52000DC0769:EN:HTML
17
creating strategic energy stocks and creating new energy corridors for the
security of supply. The thesis will concentrate mainly on the last priority namely
the creation of the Mediterranean energy corridor.
5.2. European Commission Green Paper on Energy Efficiency-or Doing
More With Less "-com(2005) 26540
This document anticipates economic growth through savings in energy
consumption in accordance with the objectives of Lisbon Treaty and the Kyoto
Protocol41. The Green Paper proposes consultation between public and private
energy bodies, NGOs and consumers in energy efficiency and cooperation with
third countries through the establishment of standards on energy efficiency that
are compatible with international standards. It is an oxymoron that, while
Member States have acknowledged that more has to be done to ensure greater
energy efficiency, they hesitate to commit to a mandatory annual energy
consumption decrease of one per cent in the proposed Directive on energy end-
use efficiency and energy services.
Despite the effect that energy efficiency will have in supporting the economy and
improving competitiveness, only small efforts have happened. EU Member States
should be forced to commit to targets for improving energy efficiency to ensure
that the ambitious goals of the Commission are reached.
Promoting energy efficiency is the cleanest way of making alternative energy
available.
5.3. European Commission Green Paper A European Strategy for
Sustainable, Competitive and Secure Energy - Com(2006) 10542
Outlines the energy scene of the 21st century in which the European Union is
expected to play a leading role since it is the second largest energy market in the
world. The Paper sets out six priority areas:
1. develop a competitive internal energy market (natural gas & electricity);
2. strengthen the contribution of the internal market in energy supply
security through the solidarity among Member States in matters of
infrastructure;
3. create a European framework for national energy decisions because of the
interaction of energy systems;
40
See http://eur-lex.europa.eu/LexUriServ/site/en/com/2005/com2005_0265en01.pdf 41
See http://unfccc.int/kyoto_protocol/items/2830.php/ 42
See http://europa.eu/documents/comm/green_papers/pdf/com2006_105_en.pdf
18
4. generate an integrated approach to the phenomenon of climate change;
5. encourage technological innovation in the energy sector;
6. articulate a coherent external energy policy, with actions that will be
agreed at Community level, and in collaboration with specific countries
such as Russia, the Caspian Sea countries, Turkey, and the countries of
the Mediterranean.
The cooperation will include infrastructure projects, financed through European
Investment Bank –EIB-43 and the European Bank for Reconstruction and
Development –EBRD-44 funding actions for strengthening the energy sector of
the EU's energy partners.
The paper mentions a threefold of objectives concerning the EU energy policy:
sustainability – competitiveness – security of supply. These objectives will be
repeated in various Commission texts making them the basic pillars of the future
EU energy policy.
5.4. The Commission Communication "An energy policy for Europe ',
COM (2007) 145
The Communication mentions the importance of energy in the EU integration
process, and highlights the challenges of today that require joint action.
Emphasis is given on the objective of sustainability and protection of the
environment and the 20-20-20 targets.
20-20-20 for the 20% reduction in carbon emissions, the increase by 20% in the
share of renewable energy in the energy mix of Member-States and the
reduction of 20% of primary energy use, through improvements in energy
efficiency by 2020. The European Council, in March of 200746 approved these
objectives within the framework of an integrated approach to climate and energy
policy47. In January 2008 the European Commission proposed a binding
legislation for the implementation of the objectives 20-20-20. Known as "bundle
for the climate and energy ", which was agreed by the European Parliament and
43
See EIB Report, Evaluation of Renewable Energy Projects in Europe – Synthesis Report,
http://www.eib.org/attachments/ev/ev_renewable_energy_projects_in_europe_en.pdf 44
European Bank for Reconstruction and Development (EBRD): Sustainable Energy Initiative
(SEI), 2009. Action and Results 2006-2008 45
See http://ec.europa.eu/energy/energy_policy/doc/01_energy_policy_for_europe_en.pdf 46
See http://register.consilium.europa.eu/pdf/en/07/st07/st07224-re01.en07.pdf 47
See http://ec.europa.eu/clima/news/index_en.htm
19
the Council in December 2008 became law June 200948. The Communication also
refers to external energy relations between the European Union and its energy
partners which should be based on transparency, the reciprocity of interests by
means of common principles and rules. Finally, it urges the increase of the
financial activities of the EIB in the field of energy and promoting the EU's
interests through the activities of the IEA.
5.5. The "Energy" of the Treaty of Lisbon 200749
The Treaty tried to streamline the structures within the Union in order to operate
more effective. The Treaty of Lisbon desires to give to the European Union an
enhanced intervention capability in priority areas for the Union and marks a
special expansion of its internal policies50. One of these areas is energy and it is
the first time that a separate Chapter on energy is included in the Treaty. This is
clearly a qualitative upgrade that highlights the importance of energy policy
within the European Union. The relevant text of the Treaty makes reference to
the spirit of solidarity that should prevail between Member States in case of an
energy crisis that directly influences the economic situation of Member States.
However, the right of each Member-State to determine the conditions for its
energy resources usage, the choice between different energy sources and the
general structure of its energy supply is not restricted. A harmonisation
mechanism is also not included in order to align national energy interests within
the entire European Union.
5.6. Commission communication Energy for 2020. A strategy for a
competitive, sustainable and secure energy COM (2010) 639 51
The Communication determines the energy priorities for the next decade. The
text starts with the subtitle "the price of failure is too high" stressing this way the
need for realizing the objectives of the EU energy policy. These priorities do not
differ from the priorities already defined in the Green Paper of 2006 but essential
actions are clearly defined.
48
See http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:140:0063:0087:en:PDF 49
See http://europa.eu/lisbon_treaty/index_en.htm 50
Van Langenhove Luk & Daniele Marchesi, “Lisbon Treaty and the emergence of Third
Generation Regional Integration”, Jean Monnet/Robert Shuman Paper Series, Vol.8, No.9,
June 2008, pp.12. 51
See http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2010:0639:FIN:En:PDF
20
5.7. Commission communication Priorities for the energy infrastructure
for the 2020 and beyond – draft consolidated European energy network
",COM (2010) 67752
The communication stresses the importance of energy infrastructure for realising
the set EU energy policy objectives. Energy infrastructure is defined as
“adequate, integrated and reliable energy networks are a crucial prerequisite not
only for EU energy policy goals, but also for the EU's economic strategy”. The
need for diversification of supply sources is defined as this differentiation will be
the key to enhance security of supply, but also promote a more intense
competition between energy markets. In the text it is highlighted that "EU pays
the price "of an inadequate infrastructure and remains vulnerable in times of an
energy crisis. On the issue of funding, the text notes that the current economic
downturn accentuates the infrastructure investment reduction.
Chart 7: Priority corridors for electricity, gas and oil
Source: EU-DG Energy
52
See http://www.energy.eu/directives/com-2010-0677_en.pdf
21
5.8. European Council Summit on energy, 201153: "Europeanising
Energy Policy: time to act
It is the first Summit of the European Council devoted to the Union's energy
policy aiming to end in a "new Chapter54"with a view to taking direct action for
the fulfilment of predefined objectives of EU energy policy. This statement sets
for the first time a concrete period for the creation of an internal energy market.
By 2014 electricity and natural gas should be traded within the EU as easy, as
goods and services.
The solidarity among Member States for smooth operation of energy networks
and the creation of an appropriate legal environment, attractive for investments
in energy projects by the private sector is also crucial. The conclusions of the
Meeting pay special attention to the external dimension of EU energy policy.
More specifically, the High Representative of the Union for Foreign Affairs and
Security Policy is called to take full account of the dimension of energy security,
when dealing with the EU's Neighbourhood Policy55. Union and Member States
need to coordinate better their activities with a view to ensure as much as
possible greater coherence and consistency in EU energy relations with countries
that are the main suppliers and transit countries of energy products.
5.9. Communication from the Commission progress towards achieving
the objective of energy from renewable sources by 2020 ", COM (2011)
3156
The Communication states that the energy from renewable energy sources is "a
central component of the EU energy policy ". The relevant directive 2009/28/EC
of the European Parliament57 for the promotion of the use energy from renewable
sources is a significant foundation for the further promotion of the relevant
industry. Despite of the positive environmental effects it is also expected to
create a significant number of new jobs. The adoption of a binding Directive in
2009, according to statistics cited in the communication, contribute as a catalyst
to approach the objectives 20-20-20 in all sectors of energy consumption
53
See http://ec.europa.eu/energy/time_to_act_en.htm 54
Seehttp://www.eu2011.hu/news/new-chapter-european-energy-policy 55
See Van Vooren Bart, Progress, potential and limitations of EU external energy policy three years post-
Lisbon, Swedish Institute for European Policy Studies – 2012 56
See http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2011:0031:FIN:EN:PDF 57
See http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=Oj:L:2009:140:0016:0062:en:PDF
22
(electricity, transport, cooling and heating, etc.) in the majority of EU Member
States.
The high cost of the renewable energy industry, promoted globally particularly in
the US and China, combined with the current economic crisis are major
challenges for the industry. Essential is also that the Communication noted the
coordination of financial institutions and investment options at national and
community level is very important.
5.10. Commission communication on security of energy supply and
international cooperation The EU Energy Policy. Engaging with Partners
across our Borders COM (2011) 53958
It is the first Communication that clearly invites Member States to align
objectives and actions in the field of external energy relations. The
Communication enhances the external dimension of EU energy policy and tries to
lay the groundwork for a more coordinated strategy within energy partners. The
past has shown that bilateral energy agreements between individual Member
States of the Union and third-party suppliers can lead to internal market
fragmentation rather than strengthen energy supply and the competitiveness
within the EU. With this Communication, the EU seeks, for the first time, to take
concrete measures in order to elicit, somehow, the control of external energy
policy from the Member members. In the first phase, the EU seeks to monitor
closely all intergovernmental energy agreements of Member States with third
countries. In the long run, it will seek to negotiate the actual energy agreements
in the name of its member states.
A truly innovative element is the clear provision for strengthening the
information exchange mechanism between Member States concerning upcoming
energy arrangements and the proposal for a legal framework that would oblige
Member States to provide the Commission with all the essential information for
any new and old energy agreements. Before any new agreement will enter into
force, the Commission will have the possibility to control its compatibility with
relevant European legislation.
In the field of infrastructure, key priorities for the EU, according to the
Communication, is the implementation of the so-called Natural Gas Southern
Corridor, which connects the Caspian basin and the Middle East with Europe59.
58
See http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2011:0539:FIN:EN:PDF 59
For further details see upcoming chapter
23
Environmental challenges and the objectives of the EU in the field of renewable
energy become a priority and accelerate the investment in the so-called
Mediterranean Solar Plan60 with electricity generating capacity of 20 GW, 5GW of
which is destined for export to the EU countries. It appears that the importance
the Mediterranean region is increasingly upgraded not only in the field of
hydrocarbons supply but also in energy production from renewable energy
sources.
The most innovative element of this Communication relates to the effort to revise
the existing frameworks of cooperation related to EU external energy policy
objectives. More specifically, the Communication proposes further expansion,
deepening and extension of the Energy Community of South-East Europe61 until
2016. It refers to the need to strengthen its energy relations with other major
energy consumers, mainly the US, China and Japan, and emerging economies,
notably India, Brazil and South Africa. The Communication is putting the issue of
empowering and modernizing the global governance system, and supporting the
EU cooperation with the IEA, the World Forum for Energy (IEF)62, the
International Partnership for Energy Efficiency Cooperation (IPEEC)63, the
International Renewable Energy Agency (IRENA)64, and promoting the strategic
objectives of EU energy policy at the G-8 and G-20.
In conclusion, through this communication, the EU takes for the first time specific
measures to lead the external energy policy of its member states65. In the first
phase the EU seeks to monitor all intergovernmental energy agreements
between Member States with non-member countries. In the long run, the EU will
seek to negotiate the energy agreements on behalf of its member states.
Through the Communication the EU is looking at strengthening its external
energy policy and through the upgrading of existing cooperation frameworks
such as the energy community which is based on the logic of promoting rules
and of the internal energy market in the EU neighbouring countries.
60
See http://ec.europa.eu/europeaid/what/energy/policies/southern-neighbourhood/msp_en.htm 61
See http://www.energy-community.org/portal/page/portal/ENC_HOME 62
See 3.4 63
See http://www.ipeec.org/ 64
See 3.3 65
See Van Renssen Sonja, “External energy policy: Brussels takes charge”, European
Energy Review, September 2011; http://www.europeanenergyreview.eu/site/pagina.php?id=3204
24
Chart 8: the South Natural Gas Corridor
Source: Euractiv66
In conclusion, the effort to achieve energy security in the EU is based on two
main pillars:
1. Better energy efficiency with the aim of optimizing energy consumption and
fight climate change. This objective requires Member States "energy mix"
diversification with natural gas and renewable energy sources occupying a bigger
share in the energy consumption. Third countries contribution in the field of
renewable energy is also important with the Mediterranean Solar Plan used as
lead example. The integration of the EU internal energy market is also required
so that it can offer to the final energy consumers a wider, more stable and
attractive choice in terms of price for their energy supply.
2. Ensure continuous and adequate energy supply. This goal requires close and
reliable relations with EU energy partners, with the producing and transit
countries. Energy security is an important aspect of EUs external policy and
influences regional cooperation structures such as the Euro-Mediterranean
Cooperation67 and the Eastern Partnership68. It requires also a very close
cooperation between EU Member States. Given the energy interdependence of
EU Member States in financial, technical and political terms greater solidarity and
consultation between Member States is required. Unilateral national decisions
increase the risk of divergence from the energy strategy the EU that can lead to
higher prices or changes in regional production or consumption of energy, to
name two only one of the issues that may arise.
66
See http://www.euractiv.com/ 67
See Union for the Mediterranean: http://www.ufmsecretariat.org/en/ 68
See Eastern Partnership: http://eeas.europa.eu/eastern/index_en.htm
25
5.11. Commission Communication “Making the internal energy market
work": (2012) COM 66369
In this Communication, the EU shows the way how a functioning internal energy
market can be achieved. The Commission invites the Member States to take
greater efforts to implement and enforce the existing EU legislation on the
internal energy market. The Commission will work with Member States to
strengthen the position of consumers and reduce market-distorting government
intervention.
European Energy Commissioner Günther Oettinger said: "When it comes to gas
and electricity, citizens and business are interested into two things: a safe supply
at all times and affordable prices. Europe can achieve this with a functioning
European energy market70."
Although progress has been made in terms of wider choice for consumers, the
reduction of energy prices and ensuring a sufficient power supply at any time,
more needs to be done to use the potential of a truly integrated European
market. At the completion of the EU internal energy market in 2014, the
Commission plans several measures. This will include:
- Implementation of the internal market directives and application of competition
law. Even 24 months after the implementation date, some Member States have
not yet fully implemented the third internal energy market package. The
Commission will continue to audit the procedure and try to ensure that the
relevant European regulations are properly implemented. The competition rules
must be rigorously enforced to ensure a level playing field for all market
participants.
- Strengthening the position of consumers. Studies show that only one in three
consumers compare price offers. It is estimated that consumers would have
annually saved up to EUR 13 billion in the EU if they would change to the
cheapest electricity provider71. The Commission will ensure that the consumer
energy value can be followed by all market participants correctly. In addition, the
Commission will promote the implementation of intelligent consumption systems,
69
See http://ec.europa.eu/energy/gas_electricity/doc/20121115_iem_0663_en.pdf 70
See Euroactiv, Brussels urges EU countries to stop energy market distortions, published
15 November 2012 71 See Molenbroek Edith, Blok Kornelis, Saving energy: bringing down Europe’s energy prices
for 2020 and beyond, Friends of the Earth Europe and Climate Action Network Europe,
February 2013
26
which allows consumers to manage their consumption real time, and have better
control of their energy bills. In addition, the report on transparency of retail
energy markets in the EU sets for a clear overview on prices tariffs and offers.
- Flexible market organization. Some countries are planning to support the
available energy capacity by generators, in order to ensure sufficient capacity,
even if no electricity is available from alternative sources such as wind and solar
energy. However, early introduction of capacity assurance mechanisms can lead
to internal market fragmentation and hinder investments. Prior to the
implementation of such mechanisms, Member States should analyze whether
there is a lack of investment in capacity and, if so, why.
In addition, the Commission will propose guidelines for support schemes for
renewable energy, to improve the efficiency of the internal market
6. The European Gas Scene
The European Union is the most important consumer of natural gas in the
Eurasian region and particularly interested in security of supply issues. Today the
European Union is already dependent on gas imports. The situation of the EU is
expected to be more complicated in the future. Although on the supply side there
is enough gas available, the European Union does not have enough natural gas
to meet its needs because of an increased global demand, or because of the
interregional competition to the access the regional gas deposits72.
On the following pages, we will look at the European situation starting with a
short historical overview of the European gas supply. Then the thesis will
thoroughly explain the current natural gas supply situation in the EU and look at
a solution that will increase energy security in Europe.
6.1. Historical development of the Gas Supply in the EU
Due to the changing composition of its members it is hard to examine historically
the evolution of the EU's natural gas supply. Today, the EU has 27 members,
who have gone through a different development in the field of gas supply caused
by their history. Roughly one can distinguish between two or three groups: a
group of Western States, the Soviet Union and its satellite States. The Western
States are the former members of the "EU-15", prior to the 2004 enlargement.
The three Baltic States of Estonia, Latvia and Lithuania are the only EU members
72
See Egenhofer, Christian et.al. European Energy Security. What Should it Mean? What to
Do? ESF Working Paper No. 23 October 2006
27
who formerly belonged to the Soviet Union. The third group is composed by EU
members that before were members of the Council for Mutual Economic
Assistance CMEA also known as COMECON73.
Already in the 1960s large Western European countries, such as France, (West)
Germany, Italy, the Netherlands and the United Kingdom, began exploiting and
consuming natural gas. At the end of the 1950s and 1960s larger gas findings
mainly in the Netherlands, but also in the UK and in Northern Germany, led to
the creation of a first European natural gas market with cross-border trade.
Center of this first international natural gas market on European soil was the
Dutch Groningen gas field, which supplied natural gas for up to seven States
from 1959. In order to diversify natural gas imports, the United Kingdom and
France began 1964 with the import of liquefied natural gas from Algeria. In the
following years, other countries such as Italy and Spain followed this example
(although in very small quantities), partly also with Libyan LNG. The oil shocks of
the 1970s meant that some States started to rely on the use of natural gas. The
idea was to shift as far as possible the electricity and heat production mainly
through alternative energy sources such as natural gas.
Chart 9: Gross inland gas consumption in EU-27, 2011
Source: Eurostat
73
See http://www.britannica.com/EBchecked/topic/399860/Comecon
28
Already in the 1970s the increased demand for natural gas had to be covered
with imported natural gas, although new findings in the British, Dutch, Danish,
and mainly Norwegian North Sea allowed regional natural gas supply. The import
demand in many other Western European countries has grown continuously. So,
for example, the gap between gas production and demand for natural gas during
the 1970s in Germany, Italy and Austria increased significantly. Measured at the
annual total increase Germanys gas imports increased from 1971 until 1980 from
30.3% to 67.8%, Italy’s from 12.2% to 55.1% and Austria’s from 42.3% to
59.8%74. On the other hand Norway established itself through the construction of
two natural gas pipelines as a European exporting nation and is supplying
continental Europe since then.
About the same time Soviet natural gas also started to reach the Western
European Nations. Already in 1967/68 the USSR supplied their western
neighbours with gas through a pipeline (russ. Called "Bratsvo", also known as
"brotherhood" or sometimes "fraternity"). Soviet gas reached Western Europe for
the first time in 1970s through Czechoslovakia. In order to meet the increasing
demand and despite the Cold War unfolding the Western countries increased
their gas imports from the Soviet Union's continuously in the 1980s75.
The cooperation of European NATO allies with the Soviet Union was very critically
viewed especially by the United States. Already the first gas contracts between
Western European companies and the USSR at the end of the 60s and 70s in the
years worried many regarding a possible political extortion of Western Europe
and faced huge resistance from the other side of the Atlantic.
The United States rejected further natural gas imports from the Soviet Union
because of the increasing dependence on imports and thus related political
pressure towards its European NATO allies. The main reason for the opposition of
Washington may have been that Moscow gained access to much-needed
74
See BP p.l.c.: Statistical Review of World Energy Workbook 2009 75
See Bothe, David / Seeliger, Andreas: Forecasting European Gas Supply. Selected results
from EUGAS model and historical verification, EWI Working Paper, Nr. 05.01, Köln 2005.
29
technology and even more urgently needed hard currency76. The Europeans
however continued to import gas from the UdSSR77.
The gas imports from the Soviet Union were complemented by gas imported
from Algeria. This natural gas reached Europe through a pipeline to Italy
(Transmed pipeline, first deliveries in 198378), as well as in form of LNG to
Belgium, Spain and France. While today Russia, Algeria and Norway established
themselves as the main natural gas suppliers of Western Europe, the
Netherlands play only the role of a swing supplier79.
Chart 10: EU-27 imports of natural gas – percentage of extra EU imports by country of
origin
76
76
1980 UdSSR earned through Gasexports approx. 14,7 Billion US-Dollar, corresponding to
62,3% of its foreign currency reserves, see Victor, Nadejda M. / Victor, David G.:
Bypassing Ukraine: exporting Russian gas to Poland and Germany, in: Victor, David G./
Jaffe, Amy M./ Hayes, Mark H., Natural Gas and Geopolitics. From 1970 to 2040, Cambridge
2006,
77 See Matthies, Klaus: Soviet Natural Gas – A Threat to Western Europe’s Security?, in:
Intereconomics, Vol. 16, Nr. 5, September/October 1981 78
See http://www.bakerinstitute.org/publications/algerian-gas-to-europe-the-transmed-
pipeline-and-early-spanish-gas-import-projects 79
See Bothe, David / Seeliger, Andreas: Forecasting European Gas Supply. Selected results
from EUGAS model and historical verification
30
After the break up of the Soviet Union, Russia took over the dominant position of
the Soviet Union concerning the supply of the former satellite States. The former
COMECON countries had been favoured by special gas relations with the USSR
and as far as possible protected from price fluctuations in the world energy
market, something that has changed after the end of the Cold War. The
integration of former Soviet satellite States into Western organizations has put
an end to the supply of Russian energy to lower prices. The almost exclusive
infrastructural connection to Russia through pipelines remained. In contrast to
earlier times, the pipelines had to cross independent States, above all the
Ukraine in order to reach the Western European markets. Today, many of the
new EU members see the dependence from Russian natural gas, which reaches
in some Member States 100%, as a major problem.
6.2. The current supply situation in the European Union
In 2007 natural gas represented 24% of energy consumption across the EU and
in recent decades could increase its share (in 1965 the share of natural gas was
4%, 1975 already 14%, 1985 and 1995 accordingly 17% and 20%).
Among EU members, the share of natural gas in the energy supply varies
however partially significantly. Natural gas has the highest share as primary
energy in Hungary (39.6%), the Netherlands (39.5%) and Italy (37.9%), Greece
(10%), Finland (9.9%) and Sweden (1.8%) have the lowest80.
Chart 11: Gross national Consumption
80
See Eurostat: Energy Yearly Statistics
31
In 2011, the EU-27 demanded significantly more natural gas than produced
within the Union. About 489 BCM of natural gas were consumed by Member
States, but only 186 BCM or 38.7% of the total demand, produced. So the rest
had to be imported in order to meet the demand. As already shown the current
reserves and resources of the European Union do not satisfy the long-term
demand.
Chart 12: Gas Demand by OECD country, 2010 and 2011 (bcm)
Source: IEA, Natural Gas Medium-Term Market Report, 2012
It is significant that in 2012 gas demand in Europe did not recover as it
remained, according to preliminary estimations, below 2011 levels. Gas
consumption was hit by low economic growth translating into slow power
demand increases and sluggish development in the industrial sector, high gas
prices, and the strong growth of renewable energy.
Chart 13: Natural gas consumption in OECD Europe by end – use sector, 2008 – 2035
(tcf)
Source: IEA, International Energy Outlook 2011
32
Chart 14: Gas Storage Levels in Europe in 2010, 2011 and 2012
Source: IEA
However, gas demand in Europe due to the anticipated economic recovery is
forecasted to increase over the next two years despite the on going economic
crisis in the Eurozone. According to IEA estimates natural gas consumption in EU
member states is expected to increase from 510 bcm (est.) in 2012 to 547 bcm
in 2015, 561 bcm in 2017 and around 585 bcm in 20208182.
Chart 15: World Gas Demand, 2000-17
Source: IEA
81
See IEA, “Gas Medium-Term Market Report 2012,” 82
See International Energy Agency, “Are we Entering a Golden Age of Gas?: Special Report -
World Energy Outlook 2011,” Paris, November 2011
33
In the production front, European production in 2011 decreased and lost almost
28 bcm in one year. The United Kingdom is responsible for almost half of this
drop as it reported a loss of 12.6 bcm production. UK gas producers have been
complaining about the instability of the fiscal regime, which in their view led to
lower exploration and sluggish business confidence. But other countries
contributed as well to the drop in production. The Netherlands lost almost 8 bcm
of gas production, which given the collapse of European gas demand, was not
unusual since the country often acts as a swing producer. Denmark lost 1.6 bcm
and Germany 0.7 bcm. This is largely due to the state of mature production
areas whose decline cannot easily be reversed. More surprisingly, Norwegian gas
production, which had been the constant driver of European gas production
growth over the past ten years, slowed and lost around 5 bcm, largely due to
production declining in 2011.
The Caspian region, which is having only a peripheral role in the European gas
scene, gained some 15 bcm in new production but saw widely divergent trends:
Turkmenistan’s gas production increased by a third, driven by exports to China.
Kazakh production also rose by 11% but most of the new gas was also exported
East. In contrast, Azerbaijan saw a slight production decline that is also reflected
in lower exports to Turkey, while Uzbek gas output also dropped by an estimated
4%. Production in other FSU and non-OECD European countries dropped slightly,
the only exception to that trend being Bulgaria83.
7. The Role of the Eastern Mediterranean related to Energy Security in Europe
As seen in the previous chapters Energy security is a necessity for the sufficient
and uninterrupted energy supply of a state or a region. It relates with many
variables that contribute to the achievement of that goal. Some of them are: the
existence of the necessary suppliers and reserves, their credibility, the existence
of a supply route, transport security, etc.
Specifically, in the area of the eastern Mediterranean, energy security has two
aspects. First, that the states of the region ensure the necessary resources in
terms of energy and secondly, that the Eastern Mediterranean has to be
regarded as a crucial corridor for energy supply in Europe. In case of a gas
discovery in the region, energy security for the countries of the eastern
83
See Ratner, Michael Et. Al. Europe’s Energy Security: Options and Challenges to Natural
Gas Supply Diversification. Washington, DC. Congressional Research Service, March 13, 2012
34
Mediterranean would strengthen the prospect of discovery, exploitation and
export of natural gas. The discoveries of gas fields will be an opportunity to
reduce energy dependency of the states of the region, in one degree or even
pursuing energy independence and / or self-sufficiency in some cases. They will
boost growth; enhance security, development and stability of the whole region84.
For Europe, the risk of supply of natural gas from the eastern Mediterranean will
be reduced, as well as related costs85. The Mediterranean is generally one of the
main transit routes for gas consumed annually in the EU, and the main transit
route in general, including oil. Approximately 50% of the annual European
consumed oil passes through the Mediterranean and 35% of annual European
consumed gas. In addition, as shown in the below hart, 35% of the natural gas
imported from Europe from countries such as Algeria, Qatar, Egypt, Libya,
Nigeria and others comes via the Mediterranean. While 50% of the oil from the
Middle East and elsewhere passes also through the Mediterranean.
Chart 16: Imports of Natural Gas (left) and Oil (right)
86
Concerning energy security in Europe, practically it mainly takes the form of
finding alternative energy suppliers and diversification of supply routes and
84
See Bank of America Merril Lynch, “East Mediterranean: Europe’s Final Energy Frontier?”,
The Oil Gusher #100, Industry Overview, 1/10/2012 85
See Weissenbacher, Manfred, 2009: Sources of Power- How Energy Forges Human History
(Volume One): The Ages of Foraging, Agriculture, and Coal (Volume Two): The Oil Age and
Beyond (Santa Barbara/Denver/Oxford: Praeger/ABC-Clio), http://www.um.edu.mt/__data/assets/pdf_file/0016/150424/Chapter_23_-
_Manfred_Weissenbacher.pdf 86
European Commission, Directorate General for Energy, “Key Figures”,
http://ec.europa.eu/energy/observatory/countries/doc/key_figures.pdf
35
secondarily those of spreading the use of Renewable Energy Sources (RES),
reducing energy consumption, liberising energy markets within the European
countries, coordination of legislation at EU level and the development of new
technologies that will contribute to the above.
At present, however, the need for diversification of imports relates mainly to the
heavy dependence on Russian energy. The dominant position of Russia in the
European energy imports and its pursuit to monopolise the energy transit to the
European market creates security dilemmas in the Union. The degree of
dependence, touching in some cases 100% and in total according to Eurostat
reaches 64.2% for gas and 83.5% for Oil makes the European countries
vulnerable to Russian interests. Finding additional energy suppliers, which so far
has not been very effective, will help reducing energy dependence from Russia
and limit any side effects for European affairs. Similarly in the case of
diversifying gas transit the Russian control over gas-transport wherever it comes
from, is equally problematic from a European perspective. As mentioned above,
Russia seeks to control the path of the gas and when interfaced with Europe via
the Caspian pipeline South Stream.
Chart 17: Dependence on imports of energy products, EU-27
36
Chart 18: Dependence on Gas Imports
Chart 19: Energy Dependence - Imports of Energy Products
However, the realization of both projects to link the Caspian is questionable, but
even if it comes to fruition there will be enough demand in order to absorb
37
Eastern Mediterranean gas. Therefore Europe’s interests are identical to those of
the Eastern Mediterranean member states -shortly exporting gas-.
The coincidence of interests between the EU and the countries of the Eastern
Mediterranean could create interdependence with the apparent result of creating
political stability in the medium and long term. Based on the above the ground
for the political and economical development and of a long and mutually
beneficial cooperation can be achieved.
This way the opportunity is offered to the eastern Mediterranean states to play
an additional role, key to European energy security, for mutual benefit and with
low risk, namely, the role of alternative gas supplier-European states87.
The indications related to the size of the gas reserves in the region are clear,
that the gas discoveries can not cover themselves the yearly European gas
consumption. The countries of the eastern Mediterranean, based on existing data
on the size of the discovered fields, can cover only a small part of Europe's
energy demand. Russia will continue to be the main energy supplier for Europe,
but not exclusively. So the Russian exports will not be affected, but only Russian
influence in European affairs.
The amount of energy that the EU will be able to import in the future from the
Eastern Mediterranean area, could be an emergency reserve in case of a supply
interruption from Russia. Should for example a new crises in Russian - Ukrainian
relations arise, which could lead again to close the energy supply, thus depriving
European countries gas for weeks and jeopardizing the smooth functioning, the
new route could provide a solution.
A complementary supply corridor such as the eastern Mediterranean could also
boost the energy cooperation between the EU and Russia. The creation of
competitive conditions could increase the bargaining power of the EU, affecting
positive a more detailed framework for cooperation on energy issues. For
example, the control over prices, the increasing globalization of energy markets,
reforms in the energy sector, reduction of pollution, and the use of more
environmentally friendly forms of energy production88. The Europe - Russia
87
See Bruneton Alain, Konofagos Elias, Foscolos Anthony, “The importance of Eastern
Mediterranean gas fields for Greece and the EU”, Pytheas Market Focus 2012 88
Günther H. Oettinger and Sergey I. Shmatko, EU-Russia Energy Dialogue, Joint Report: “EU-
Russia Energy Dialogue 2000-2010: Opportunities for our future Energy Partnership”,
Brussels/Moscow, 11/2011, http://ec.europa.eu/energy/international/russia/doc/reports/2010-11-report-
10thtanniversaryfinal.pdf
38
Energy Dialogue has so far delivered an early warning mechanism related to an
energy supply disruption. But the Europe - Russia Energy Dialogue has also
contributed to the opening of the energy market and helped understand each
others point of view, leading to a foreign direct investment increase89.
With regard to Russia, the new energy discoveries in the eastern Mediterranean
are an opportunity to extend its influence, but also a challenge to control this
alternative energy corridor to European energy markets. Russian interests, try to
position themselves in the region. Thus, linking the eastern Mediterranean to
Europe is not necessarily detrimental to Russian interests. For Moscow to control
the area by acquiring rights to use or transit of gas to the European market is an
important objective in the context of the control policy over the energy sector in
Europe. In order to maintain its dominant position in the European energy
market and control over the supply routes, Russia will most likely attempt to
corrode the European effort to diversify transit.
In any case long term the Russian interests will be affected by the energy
connection of the eastern Mediterranean with the EU, to the extent that the
supply exclusivity in transit to the European energy market is lost. This will be
the case especially if Russia chooses to focus solely on exports to the EU and not
to Asia, as it reduces the degree of Russian influence over European affairs.
In Europe, however, the emergence of the eastern Mediterranean in considerable
energy supplier is a great opportunity to address the energy security dilemma
and much more. Indeed, cooperation with countries in the region, but also the
opportunity for these counties to grow through revenues deriving from energy
exports will probably pave the way towards political and economical development
and other areas, of particular importance to European interests, such as
migration.
The viability of the European project, coupled with the increase of European
power and securing a competitive position in a changing international system in
the future, requires safeguarding the vital interests, increase leverage and the
creation and control of the sphere of influence in region. It is therefore of
strategic and economic interest of the EU to ensure not only cooperation in the
eastern Mediterranean, but the development of this, investing and spreading its
influence and expertise.
89 European Commission, “Early Warning Mechanism”
http://ec.europa.eu/energy/international/russia/dialogue/warning_en.htm
39
The options for Europe are two, either to import LNG by constructing the
necessary facilities something that relates to high cost, or to seek greater
connectivity with the eastern Mediterranean via the construction of pipelines90.
Particularly important parameter in question by addressing the problem of
energy security is the joint European action. European states can not individually
deal with energy insecurity. Thus, the sharing of risk and financial burdens is
mandatory. Better coordination, greater cooperation and focus on building a
network of cross-border energy interconnections between all European countries,
would contribute to better deal with shortfalls and energy crises91.
7.1. Geopolitical, economic and environmental issues
The purpose of this chapter is to examine the recent discoveries of significant
deposits of natural gas in the eastern Mediterranean in the light of geopolitical,
economic, and environmental constraints and will also examine the nature of
potential issues that may arise from the gas discoveries, but also the transit of
natural resources from countries in the region to prospective buyers.
Essential for the development efforts of any exploration and exploitation of newly
discovered gas fields in the eastern Mediterranean is considered the strategic
orientation, the possible choices of countries, and the balance to be formulated in
an already fragile and volatile region, such as the Eastern Mediterranean.
At present, the situation seems to be as follows: the countries of Eastern
Mediterranean can be divided into a) instability factors, b) neutral actors and c) a
State already eager to develop partnerships, regarding the exploitation of
hydrocarbons with other states of the eastern Mediterranean.
It is obvious that state cooperations are very volatile in an area as the eastern
Mediterranean. Nevertheless, the assessment of the prospects of exploitation of
newly discovered gas fields is highly dependent on the degree of stability that
can be ensured in the region by the involved actors. In other words, attracting
investors, buyers and the production of energy deposits of the eastern
Mediterranean will depend in a large extent on a risk assessment process, which
becomes negative in regions with severe or continuous interstate conflicts and
policy instability which could be a cause of disturbance in the smooth flow of
hydrocarbons to prospective buyers. Possibly, a large share of responsibility for 90
See also BP, “BP Energy Outlook 2030,” London, January 2012. EIA Analysis & Projections 91 European Commission, Directorate General for Energy and Transport, Second Strategic
Energy Review, “EU Energy Security and Solidarity Action Plan”
http://ec.europa.eu/energy/strategies/2008/doc/2008_11_ser2/strategic_energy_review_memo.pdf
40
the maintenance and guarantee of stability in the region will be taken by the
same states, which will probably have to make mutual concessions92. Besides,
one of the main factors that could bring stability to the region is the
reconciliation of each state goal in a common one for all, or at least for most
countries of the region to come out of the vicious circle of underdevelopment and
frictions.
7.2. Turkey as a possible transit
The cheapest interconnection pipeline option with Europe would be for the
countries of the eastern Mediterranean via Turkey. The pipeline would be
connected to the Turkish pipeline already supplying the European market,
northbound Cyprus by sea and connected with Turkey. Turkey is a big market,
and can potentially absorb some of the energy resources. Certainly, the outdated
infrastructure network available and the unwillingness to accept a third party in
its own network will constitute important limitations to this option. However, the
poor political relations with Cyprus, and severing relations with Israel are the
most important constraints.
The gradual loss of trust between Israel and Turkey, and the refusal of existing
leaders to take the necessary steps to normalize their relations, describing the
current situation between the two parties93.
Overall, the political instability in relations Ankara - Ankara Limassol - Tel Aviv
would be a risk factor. While any deterioration in relations between them, would
probably have a negative impact on future customers supply94. However the
above mentioned development could be seen as a trigger to smoothen the fronts
and use the new discoveries for the common interest and enhance prosperity and
political and economical development.
7.3. Route via Greece
Regarding the development of cooperation in the region, Greece could play an
important role, acting as an agent of stability, peace and promoting energy
cooperation in the eastern Mediterranean for two main reasons. First, because
traditionally it has friendly relations with most countries of the Eastern 92
See Φίλης Κωνσταντίνος, “Υδρογονάνθρακες Ανατολικής Μεσογείου: Εργαλείο Σύγκλισης ή Προϊόν
Ανταγωνισμού;”, http://www.aixmi.gr/index.php/ydrogonanthrakes-anat-mesog/ 93
For the latest development see: A useful first step, Economist 30/03/2013 94 See Henderson Simon, “Energy Discoveries in the Eastern Mediterranean: Source for
Cooperation or Fuel for Tension? The Case of Israel”, Policy Brief 06/2012, The German
Marshall Fund of the United States, Mediterranean Policy Programme. http://www.gmfus.org/wp-content/blogs.dir/1/files_mf/1339083541Henderson_EnergyDiscoveries_Jun12.pdf
41
Mediterranean, so it could act as trusted intermediary between countries, whose
relations are strained or cold, and secondly, because the country has substantial
international support such as participation in the EU's energy market that could
be (if promoted and pursued consistently and correctly), the main destination of
the gas of the region95.
In short, we could say that the geopolitical situation and specific, and wider
interests in the Eastern Mediterranean along with the uncertain domestic political
situation, that exists in several of the countries in the region, are variables that
probably do not allow reliable conclusions regarding the future development of
collaborations or the conclusion of appropriate agreements on exploitation and
the transit of newly discovered natural resources of the region. In this regard,
States that are currently in unison interests, but also demonstrate a clear
intention to develop cooperation in the future will shift their stance, focused on
developing new partnerships.
7.4. Environmental Aspects
Last but not least an important factor of our analysis with respect to the
limitations and issues expected to arise from the exploitation of newly discovered
resources in the eastern Mediterranean, is undoubtedly the environmental impact
of any increased future use and transit of hydrocarbons in the region.
It should be mentioned that the Mediterranean Sea is the largest and most semi-
enclosed sea in the world. It represents 0.7% of total global water surface and is
a unique and largely autonomous ecosystem with its own exceptional but fragile
biodiversity. The Mediterranean also counts for 17% of the global pollution by oil
and not accidentally, considering that within a year almost 200.000 merchant
ships sail through the area. 20% of global oil shipments are shipped through the
Mediterranean, or over 370 million tons of oil, implying the rejection 100.000-
150.000 tons to the sea only from the usual maintenance and refuelling of
ships96. These numbers are not at all exaggerated, considering that the wider
95
See Sachinis Harry, “Assessment of Pipeline Options into Greece from the Eastern
Mediterranean,” presentation at the “Investment Energy Summit: Greece, Cyprus, Israel - The
Economist Conferences,” Athens, March 2012 96 Greenpeace, “Other threats in the Mediterranean”,
http://www.greenpeace.org/international/en/campaigns/oceans/marine-reserves/the-mediterranean/mediterranean-other-threats/ . UNEP/MAP, MedWaves, “The Mediterranean, an ecosystem at risk”, No 57, May 2007, and
UNEP/MAP, MedWaves,– “The Mediterranean: a (vital) drop in the Oceans & The Big Polluters”
No 52
42
Mediterranean region includes three of the most strategic passages of
international shipping, the Straits of Gibraltar at the Western Mediterranean and
the Suez Canal and the Straits of Bosporus at the Eastern Mediterranean. Of
course, several important parts of the environmental burden of the
Mediterranean are a result of the exploitation and processing of hydrocarbons.
From the 60 refineries operating in the Mediterranean region, it is estimated that
about 20,000 tons of oil annually are being rejected to the sea97.
Because of its semi-closed form, the problems of marine pollution in the
Mediterranean region should not be treated the same way as for other seas or
oceans. The refresh rate of the water and hence the physical elimination of
contaminants from the water needs a very long time. It is estimated that a full
renewal cycle of the Mediterranean water lasts from 80 to 150 years, which may
shed some light on the interval that needs an ecosystem in the Mediterranean
region, in order to "recover" from any incidents of widespread environmental
contamination, such as a serious oil accident.
From a legal point of view we could say that environmental protection in the
study area of the eastern Mediterranean is currently based on five main areas: 1)
the national legislation, 2) the Convention of the Law of the Sea, 1982, 3) other
provisions related to the prevention of marine pollution and environmental
protection, 4) the specialized regional legal framework of environmental
protection of the Mediterranean and finally, 5) the law of the European Union.
Concerning domestic laws for individual states in the Eastern Mediterranean, the
majority of them do not seem to contain rules creating a systematic and
structured framework for environmental protection of maritime areas. Only two
countries in the region, namely Greece and Cyprus include in their domestic
legislation rules and laws of environmental protection, mainly because of their
obligation to act accordingly because the scope of the Environmental Policy of the
EU from which bound as members.Regarding the provisions of UNCLOS III98,
which could ensure a minimum environmental protection in the region of the
eastern Mediterranean we distinguish Articles 192-237 of Part XII of the 97
See Greenpeace, “Other threats in the Mediterranean”,
http://www.greenpeace.org/international/en/campaigns/oceans/marine-reserves/the-mediterranean/mediterranean-other-threats/ . Also UNEP/MAP, MedWaves, “The Mediterranean, an
ecosystem at risk”, No 57, May 2007, and UNEP/MAP, MedWaves,– “The Mediterranean: a (vital)
drop in the Oceans & The Big Polluters” No 52 98
See The law of the sea: A powerful instrument http://worldoceanreview.com/wp-
content/downloads/WOR_chapter_10.pdf
43
Convention, which is based on the obligation to ensure the protection of the
marine environment from exploitation of natural resources (especially
hydrocarbons) in various marine zones. It also establishes the principles of
prevention, awareness, information, accountability, and compensation in case of
an environmental problem in the exploitation of hydrocarbons. Indeed, if there
are transnational dispute due to the creation of any of the above problems can
peacefully use mechanisms such as those provided for in Articles 279-299 of
UNCLOS. From the foregoing provisions of UNCLOS III binds all states in the
region beyond Turkey, Israel and Syria, which have not signed the convention99.
Beyond the framework of international environmental protection, we must note
that under the Barcelona Convention of 1976 (as revised in 1995 and entered
into force in 2004)100, a specialized environmental protection framework for the
entire marine area and Mediterranean coast has been established. Under the
Convention on the Protection of the Marine Environment and the Coastal Region
of the Mediterranean Sea and specialized protocols have been adopted: 1) the
prevention of pollution from shipping accidents, as the Protocol on Cooperation
for the Prevention of Pollution Ships from and in cases of emergency, combating
pollution of the Mediterranean Sea, adopted on 25/01/2002 Valletta in Malta and
came into force on 17/03/2004 and 2) the prevention of marine pollution from
exploitation, processing and storage of hydrocarbons, such as oil and natural
gas101. In the latter category indicatively the Protocol on the Protection of the
Mediterranean Sea against Pollution Resulting from Exploration and Exploitation
of the Continental Shelf and the Seabed and its Subsoil (Offshore Protocol),
adopted on 14/10/1994 in Madrid and entered into force in 2011, and the revised
Protocol for the Protection of the Mediterranean Sea against Pollution from Land-
Based Sources and Activities (Land Based Protocol), which was adopted in 1996
and is in force since Mai 2008. The revised Barcelona Convention of 1995,
ratified by all states in the region exept Lebanon. Finally, 1996 the Protocol has
been accepted by all the states of the region102.
99
See http://www.un.org/Depts/los/convention_agreements/texts/unclos 100
See http://195.97.36.231/dbases/webdocs/BCP/bc95_Eng_p.pdf 101
See Raftopoulos Evangelos & McConnell L. Moira (edit.) “Contributions to International
Environmental Negotiation in the Mediterranean Context 102
UNEP MAP, “Signatures and Ratifications of the Barcelona Convention for the Protection
of the Marine Environment and the Coastal Region of the Mediterranean and its Protocols as
at 31 December 2011”, http://www.unepmap.org/index.php?module=content2&catid=001001001
44
Last but not least important legal pillars of environmental protection in the
Eastern Mediterranean region is the EU and EU environmental law. First, we
should mention, that already in the founding Treaties of the Union detect
declaratory character commitments relating to environmental protection, both
within the EU and internationally. Thus, in Article 3 § 3 of the Lisbon Treaty we
see the Union's desire to promote environmental protection and sustainable
development. Overall, the European commitment has specialized decisions,
directives and regulations, particularly with regard to marine pollution from
exploitation and transportation of hydrocarbons from the late 1970's. Accidents
of Amoco Cadiz (1978), Aegean Sea and Brear (1993), and the assumption Brent
Spar (1995), led the EU to take the first steps in the prevention of accidents, but
also in adoption of safer construction standards of ships, transport of oil and
crews. A set of minimum standards for ships, but also for better transportation
and disposal of used oil and gas offshore entered into force. Also, in 1999 the oil
tanker ERIKA accident led into two sets of proposals: the ERIKA I and ERIKA
II103, which led in turn to the creation of the European Agency for Maritime
Safety (European Marine Safety Agency - EMSA104). Although the establishment
of EMSA105 greatly helped in preventing pollution from marine accidents and
decontamination procedures favoured the affected areas, as it functions as
operational, technical and operational arm of EU maritime safety, the non-
establishment of the Compensation for Oil Pollution Damage –COPE- Fund finally
leaves the initiative without the necessary financial resources for the proper
functioning106.
In 2000 the EU adopted Directive - Box No. 60 concerning the protection and
water quality. Then in 2002, after the accident of the oil tanker Prestige off the
Galician coast and maritime environmental disaster that affected the coasts of
Spain, Portugal and France forced the EU to adopt a new regulation that reduced
by 5 years the maximum period for phasing out of single-hull ships over 23 years
103
See Malta Maritime Authority, “Report of the Investigation into the loss of the motor
tanker Erika on Sunday 12th December 1999” Merchant Shipping Directorate. 104
See latest report under http://www.europarl.europa.eu/document/activities/cont/201207/20120724ATT49285/20120724ATT49285EN.pdf 105
See http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/trans/132715.pdf 106
See The impact of EC decision-making on the International Regime for Oil Pollution
Damage: the supplementary fund example, http://link.springer.com/chapter/10.1007%2F1-4020-3368-
0_6?LI=true#page-2
45
of life and replace them with double bottoms ships107. In 2009 the EU adopted
six major guidelines, revising fully all matters relating to maritime pollution
issues and produced perhaps the most important Directive by which any
discharge of polluting substances from ships, even in minor quantities becomes a
criminal offence108. The EU environmental legislation is tightened and has
significant binding, but only to Member States. So, in terms of area of the
eastern Mediterranean, only Greece and Cyprus are obliged to implement the
European environmental legislation. However it should be noted, that a possible
active involvement of the EU in the energy game Eastern Mediterranean, could
put a condition on trade with the producing countries of the region, keeping
some specific environmental standards, which ensure the protection the sensitive
marine environment of the region, both in the areas of mining and processing,
and the transit of natural gas to the European market.
Another aspect that deserves special mention is the protection of the cultural
heritage of the country from future operating procedures and transit
hydrocarbons in the eastern Mediterranean.
Finally, another issue that indirectly linked to above is tourism. Traditionally, the
"heavy" industry of most countries of the region is tourism that enjoys the
natural beauty and cultural heritage of the eastern Mediterranean109. The
question that must be answered by the countries of the region is "to what extent
non-environmental degradation of both the water and the landscape of the
eastern Mediterranean will ensure the maximum economic benefit from the
exploitation of their hydrocarbon”. As well as if ultimately the involved countries
believe that in order to extract process and transit natural gas they will have to
sacrifice part of their tourist industry, but also their cultural and environmental
wealth. The rise of maritime traffic, if finally the LNG option will be selected,
increases the chances of accident. In so doing two issues arise: whether the
choice of the underwater pipeline immersion is safer and friendlier to the
107
See Joanna Koukouli, “Prestige aftermath in the IOPIC Fund”, International Tug &
Salvage, March/April 2003 108
See Directorate-GeneralofEnergyandTransport, http://ec.europa.eu/energy For Energy legislation: (http://europa.eu/legislation_summaries/energy/index_el.htm ), For Environment legislation: (http://europa.eu/legislation_summaries/environment/index_el.htm ) 109
See Apostolopoulos, Y. and S. Sönmez (2000). New Directions in Mediterranean Tourism:
Restructuring and Cooperative Marketing in the Era of Globalization. Thunderbird
International Business Review, 42(4)
46
ecosystem and whether the involved parties are able to create a plan to prevent
potentially catastrophic consequences for the environment, cultural heritage and
tourism in case of an accident.
8. Epilogue - Conclusions
Recent discoveries of sufficient quantities of natural gas in the Eastern
Mediterranean increased the geostrategic interest in the region. The discoveries
increased even more the importance of these countries, this time on the global
energy chessboard. The exploration so far indicates that in the Eastern
Mediterranean region gas volumes can reach about 350 tcf and are shared
among all the states in the region. Taking also into consideration recent
announcements regarding the existence of significant quantities of natural gas in
the broader maritime area of Lebanon these quantities can increase.
The fact that several existing or estimated reserves, are located in areas of
overlapping maritime zones of at least two states, coupled with the absence of
border agreements between the majority of countries in the region (whose
relations are characterized from neutral to cold) and political instability generate
two basic obstacles. First, apparently causing an uncertainty, regarding the
sustainability of energy development projects by international companies in the
region and secondly creating a need on building transnational collaborations (to
the extent possible) regarding the use and transit of energy resources in the
eastern Mediterranean.
Subsequently it is necessary to establish and develop appropriate partnerships
between the countries involved, both in terms of exploitation as well as the
transit of natural gas. The example of the partnership between Cyprus and Israel
on the joint exploitation of the Gas Field nr 12, as well as a possible participation
in this cooperation of Greece and Turkey as gas transit counties towards the
European market are consistent steps in the right direction. Consistent with:
a) the idea of building a common interest, among several possible states of the
eastern Mediterranean of exploitation, transportation of natural resources, which
would promote cooperation, overcoming existing obstacles and hostility in the
relations between them and help them to the development and prosperity in the
region;
b) governance strategies and most profitable economic choices of countries of
the Eastern Mediterranean for two reasons. First, the choice of the European
market as a future buyer of the natural resources of the countries of the eastern
47
Mediterranean becomes due and international geopolitical, and energy realities,
the most reliable and profitable choice. Secondly, the choice of Greece and
Turkey as a key transit centres with underwater pipeline potentially guarantees
the security, viability and longevity of the entire project, which will be based on a
component of mutual benefit together110;
c) existing and future European energy needs related to achieving energy
security and diversifying suppliers and transit;
d) the European policy of diversification of transit and gas suppliers of the EU
market.
Indeed, both those under development relationships and any future synergies
resulting in the need to seek the greatest possible participation of regional states
to them. In other words, it should be aiming to function as components of a
general interest and transnational cooperation in the energy sector, ensuring,
both the duration, and the stability of the agreement. However, possible new
agreements (or boundaries, or pooling joint deposits) do not exhaust the
possibilities for institutional strengthening of relations between neighbouring
states. It could be done at the bilateral and multilateral relations to enforce /
ensure / enhance institutional cooperation, with Greece, Turkey Israel and
Cyprus needed to take relevant initiatives.
Catalytic factor in building such relationships could and should be the
participation and involvement in the regional energy game of as many key
international actors such as the EU and the U.S., which would ensure and
guarantee both the stability of the region and the longevity of any regional
partnership. In this regard, we refer specifically to the West because it has and
maintains a dominant position in the region. EU and U.S. interests continue to
exist and develop. There may be a shift in economic power from West to East
and increased political influence and economic power, but for the foreseeable
future, especially for the Eastern Mediterranean, the West maintains its
comparative advantage.
In this equation and in particular the prospect of a project that can create
prosperity, especially the people of the region should not exclude anyone.
110
See Giamaroudis A. and S.Paleoyannis, “Security of Gas Supply in South Eastern
Europe/Potential Contribution of Planned Pipelines, LNG and Storage”, The Oxford Institute
for Energy Studies, NG 52, July 2011
48
Consequently, regarding the export orientation of the gas, it has to be
emphasized, that the countries of the eastern Mediterranean should as soon as
possible clarify their intentions with respect to the total quantity, mode of transit
and the markets to which they intend to export their gas to attract the attention
of relevant international energy companies, and state actors. Already, in the
Eastern Mediterranean energy game U.S., Italian and French interest companies
are participating, in gas fields, located between Cyprus and Israel. While, as
shown by the results of recent competitions, a number of European, Asian, and
Russian energy companies are interested in participating in future tenders. A
strong engagement from larger companies with the necessary expertise and the
necessary resources, and the degree needed to create a climate of stability and
security. Beyond that, the speed of the decision making in the case where the
orientation chosen to be European, is critical, given the pending influx of
Azerbaijani gas to Europe in 2018.
At the same time, in our analysis the highly fluid and unstable nature of
interstate relations in the region should be considered. The Arab Spring has not
yet been resolved, so any firm conclusion regarding the development of any
collaboration in the field of exploitation, transit, but even the very potential gas
production in the future is not certain. Prolonged instability in Syria, which has
been extended to neighbouring countries and threatens the relationship between
several states, combined with the phase of the Egyptian introversion adds to his
uncertainty. The climate in the relations between Turkey and Israel has a
broader impact; the nuclear program in Iran and the consequent insecurity of
Israel create uncertainties regarding future movements of foreign policy of these
countries, both in the international and regional chessboard and their
relationships with the rest of the region.
The newly discovered gas fields in the Mediterranean region should be seen as a
common denominator that could help the states of the region overcome their
differences. It should be seen as a trigger towards political and economic
development, stability and peace. One way could be by investing in common
projects. The Head of States of the involved countries should develop a common
investment pool as an incentive to reduce the cost and cooperate with each
other. This pool should be available to the States for joint projects - under the
prerequisite, that they equally contribute and the projects lead to savings.
49
Abbreviations Greek
GNP Gross National Product
RES Renewable Energy
See. See
IEA International Energy Agency
EU European Union
Eur. Commission.
EEC European Economic Community
ECSC European coal and Steel Community
EURATOM European Atomic Energy Community
Eib European Investment Bank
EBRD European Bank for reconstruction and development
NGOS Non-Governmental Organizations
OECD Organisation for economic co-operation and development
F Gas
English
BRICS Brasil Russia India China
ORGANIZATION of PETROLEUM EXPORTING COUNTRIES Organisation of
Petroleum Exportation Countries
IEA International Energy Agency
IRENA International Renewable Energy Agency
International Energy Forum IEF
50
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4Gas: http://www.4gas.com Alexander’s Oil & Gas Connections: http://www.gasandoil.com Ministère de l'Énergie et des Mines :http://www.mem-algeria.org Arabian Oil & Gas: http://www.arabianoilandgas.com Bahia de Bizkaia Gas S.L.: http://www.bahiasdebizkaia.com Baltic Gas Interconnector: http://www.balticgas.com Barents Observer : http://www.barentsobserver.com BBC News: http://news.bbc.co.uk BBL Company: http://www.bblcompany.com BG Group plc: http://www.bg-group.com BG Group plc: http://www.bg-group.com BOTAS: http://www.botas.gov.tr/ BP plc. http://www.bp.com Bundesministerium für Wirtschaft und Technologie : http://www.bmwi.de Bundesverband der Energie- und Wasserwirtschaft : http://www.bdew.de Cassa Depositi e Prestiti S.p.A.: http://www.cassaddpp.it/ Caucaz.com: http://www.caucaz.com CIA The World Factbook: https://www.cia.gov/library/publications/the-worldfactbook/ Council on Foreign Relations: http://www.cfr.org DEPA: http://www.depa.gr/ Dolphin Energy Limited: http://www.dolphinenergy.com Downstream Today: http://www.downstreamtoday.com E.ON Ruhrgas AG : http://www.eon-ruhrgas.com East European Gas Analysis: http://www.eegas.com Edison S.p.A. : http://www.edison.it EGAS : http://www.egas.com.eg EGL AG : http://www.egl.ch Enagas S.A.: http://www.enagas.com Energi21: http://www.energi21.no Energy Charter: http://www.encharter.org Energy Community: http://www.energy-community.org/ Energy Information Administration: http://www.eia.doe.gov Energy Intelligence: http://www.energyintel.com ENI S.p.A.: http://www.eni.it Eurasianet: http://www.eurasianet.org EuroNews: http://www.euronews.net Europa Legislation: http://europa.eu/legislation_summaries/index_en.htm European Commission, DG Energy: http://ec.europa.eu/energy/index_en.htm European Union: http://europa.eu/ European Parliament : http://www.europarl.europa.eu ExxonMobil Corp.: http://www.exxonmobil.com Federal Antimonopoly Service (Russia): http://www.fas.gov.ru Gas de France Suez S.A.: http://www.gdfsuez.com/ Gassco AS: http://www.gassco.no Gassnova SF: http://www.gassnova.no GECF: http://www.gecforum.org GUAM: http://guam-organization.org IGI-Poseidon S.A.: http://www.igi-poseidon.com
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IHS Global Insight: http://www.globalinsight.com INOGATE Programm : http://www.inogate.org International Energy Agency: http://www.iea.org/ Iraqy Ministery for Oil: http://www.oil.gov.iq Korea Energy Economics Institute: National Energy Plan: http://www.keei.re.kr/index.html Library of Congress (Country Studies): http://lcweb2.loc.gov/frd/cs/cshome.html Medgaz S.A.: http://www.medgaz.com Middle East Economic Digest: http://www.meed.com Ministry of Fuel and Energy of Ukraine: http://mpe.kmu.gov.ua Mission of Norway to the European Union: http://www.eu-norway.org Nabucco GmbH : http://www.nabucco-pipeline.com National Economic Research Associates Inc.: http://www.nera.com National Oil Corporation: http://en.noclibya.com.ly NIGEC : http://www.nigec.ir Nigerian National Petroleum Corporation : http://www.nnpcgroup.com NJSC Naftogaz : http://www.naftogaz.com/ Nord Stream AG : http://www.nord-stream.com North Gas Company: http://www.northgasco.com North Oil Company: http://www.noc.gov.iq OAO Gazprom: http://www.gazprom.com Ofgem: http://www.ofgem.gov.uk OG21 – Oil and Gas in the 21st Century: http://www.og21.org Oil & Gas Eurasia : http://www.oilandgaseurasia.com/ Oil & Gas Journal: http://www.ogj.com OLF – The Norwegian Oil Industry Association: http://www.olf.no OPEC : http://www.opec.org/ Pars Oil & Gas Company: http://www.pogc.ir Petoro AS: http://www.petoro.no Petroleum Economist : http://www.petroleum-economist.com Petropars : http://www.petropars.com Platts: http://www.platts.com Präsident der Russischen Föderation : http://www.kremlin.ru Qatargas: http://www.qatargas.com Radio Free Europe/Radio Liberty: http://www.rferl.org RasGas, Operations: http://www.rasgas.com EU Council: http://www.consilium.europa.eu Reganosa : http://www.reganosa.com/ RIA Novosti, http://rian.ru/ Rigzone, Oil and Gas Conversion Calculator: http://www.rigzone.com/calculator/default.asp#calc RWE AG : http://www.rwe.com Sabine Pipe Line LLC: http://www.sabinepipeline.com SAGGAS: http://www.saggas.com Sakhalin Energy: http://www.sakhalinenergy.com Sakhalin-1 Project : http://www.sakhalin1.com Schlumberger Ltd. : http://www.slb.com Service de l’observation et des statistiques (Ministère de l’Écologie, de l’Énergie, du Développement durable et de la Mer, Commissariat général au développement durable), http://www.statistiques.developpement-durable.gouv.fr Shell p.l.c. : http://www.shell.com
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Sirte Oil Company : http://www.soc.com.ly Sonatrach SPA: http://www.sonatrach-dz.com South Strem-Pipeline : http://south-stream.info State Oil Company of Azerbaijan Republic (SOCAR): http://www.socar.az Statistik Austria : http://www.statistik.at StatoilHydro ASA: http://www.statoilhydro.com Statoil ASA: http://www.statoil.com Syria Oil: http://www.syria-oil.com The Central Bank of the Russian Federation: http://www.cbr.ru The Jamestown Foundation: http://www.jamestown.org The Natural Gas Supply Association (NaturalGas.org):http://www.naturalgas.org/ The World Bank: http://www.worldbank.org/ TNK-BP Ltd. : http://www.tnk-bp.com Total S.A.: http://www.total.com Trans Adriatic Pipeline AG : http://www.trans-adriatic-pipeline.com Trans Austria Gasleitung GmbH : http://www.taggmbh.at Turkmenistan.ru : http://www.turkmenistan.ru Union Fenosa S.A. : http://www.unionfenosa.es United Nations Development Programme: http://hdrstats.undp.org United Nations, Population Division of the Department of Economic and Social Affairs, : http://esa.un.org/unpp/ United Nations, Statistics Division (UNSD) of the Department of Economic and Social Affairs: http://data.un.org/Data.aspx?d=SOWC&f=inID:93 Upstream Online: http://www.upstreamonline.com West African Gas Pipeline Company Limited: http://41.204.59.211:81/index.php?hmp=1 WINGAS GmbH, & Co. KG: http://www.wingas.de Wingas Transport : http://www.wingas-transport.de
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List of Charts
Chart 1: Share of energy products in global energy demand
Chart 2: Energy "mix" in selected countries and regions
Chart 3: Global energy demand by region
Chart 4: Production, imports, consumption & energy
Chart 5: EU energy consumption by fuel type
Chart 6: Energy "mix" EU Member-States, 2009
Chart 7: Priority corridors for electricity, gas and oil
Chart 8: the South Natural Gas Corridor
Chart 9: Gross inland gas consumption in EU-27, 2011
Chart 10: EU-27 imports of natural gas – percentage of extra EU imports
Chart 11: Gross national Consumption
Chart 12: Gas Demand by OECD country, 2010 and 2011 (bcm)
Chart 13: Natural gas consumption in OECD Europe by end – use sector
Chart 14: Gas Storage Levels in Europe in 2010, 2011 and 2012
Chart 15: World Gas Demand, 2000-17
Chart 16: Imports of Natural Gas (left) and Oil (right)
Chart 17 Dependence on imports of energy products, EU-27
Chart 18: Dependence on Gas Imports
Chart 19: Energy Dependence - Imports of Energy Products
